Mayor plans to introduce tax program for city apartments

By STEVE KILAR AND LUKE BROADWATER and The Baltimore Sun

Jan 24, 2013 | 8:11 PM

As part of her push to increase Baltimore's population, Mayor Stephanie Rawlings-Blake plans to introduce legislation to the City Council next week that will provide generous tax breaks to builders of apartment buildings downtown and in six other neighborhoods.

"It will promote development in areas right now where the market might not have the proper stimulus," said Bill Henry, vice chairman of the City Council's taxation committee.

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The tax credit proposal is one of Rawlings-Blake's most direct legislative efforts to increase the population and could prove to be a significant tool to reinvigorate underused buildings and stagnating sections of the city. Opponents wonder whether it is the best method of addressing high property taxes and if subsidizing residences is a smart move during austere times.

The legislation, which Rawlings-Blake is expected to introduce Monday, will provide a declining abatement over 15 years to developers of market-rate apartment buildings with 50 or more units, according to a memo the mayor's office recently sent to council members.

In the first two years following the issuance of an occupancy permit for the building, property taxes would be abated 100 percent. By year 13, the abatement would drop down to 20 percent. In between, the abatement would step down in 10 percentage point increments.

The credit would be available for buildings in a large swath of the city center and parts of Coldspring, Jonestown, Poppleton and Reservoir Hill. Portions of the high-traffic corridors of Belair and York roads also will be included.

The bill is being introduced under a Maryland law that allows jurisdictions to offer tax credits for buildings that are environmentally friendly, so any property receiving the credit must achieve a certification of LEED silver or higher.

Rawlings-Blake first floated the tax credit idea at the annual meeting of the Downtown Partnership in October as a way to boost occupancy downtown by converting commercial buildings to residential use. The partnership released a study last year that indicated strong demand for apartments in the city's core.

City Councilman Carl Stokes, who chairs the council's taxation committee, said he likes the current proposal, with its addition of some areas outside of downtown, better than the original. He plans to hold a hearing on the bill in early March, he said.

"The mayor wanted to find ways to extend this opportunity to beyond downtown," said Ryan O'Doherty, spokesman for Rawlings-Blake. "We did a careful analysis and looked at potential growth areas, and the mayor decided to make this inclusive of those neighborhood corridors."

City Council President Bernard C. "Jack" Young said he hopes the program expands to other neighborhoods, but acknowledged big apartment buildings wouldn't be a great fit in every part of Baltimore.

"We hear from citizens all the time: 'All y'all focus on is downtown. How about economic development in our neighborhoods?' So, this is very encouraging," Young said.

Christopher B. Summers, chairman of the conservative Maryland Public Policy Institute, said he would have preferred to see an across-the-board property tax cut for all city residents, a sentiment that Stokes echoed.

"They're letting government pick the winners and losers," Summers said.

The city's high property taxes are the real problem, agreed David Hillman, the head of Southern Management Corp., which developed and runs several luxury apartment buildings downtown using tax abatements that were negotiated individually.

But he likes the idea of taking the politics out of the process of getting an abatement and hopes legislation will give the city time to find a broader fix for its property tax troubles.

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Providing tax breaks only to market-rate buildings also is likely to elicit criticism during the legislative process. Stokes said he would only support the bill if it mandated some affordable units.

The idea of giving tax breaks to market-rate units is "counterintuitive," said Mike McGuire, a community activist and builder. "These tax benefits are really just a cherry on top to make it more profitable," he said.